Show-cause notice limits adjudication: credit denial failed because the decisive ground was never proposed.

Denial of credit cannot be sustained where the show-cause notice did not propose disallowance on the ground ultimately relied upon. The notice here challenged the refund claim only on compliance with Notification No. 11/2002-C.E. (N.T.) and the effect of drawback or rebate, not on alleged errors in the input documents. Adjudication on that unnotified ground was therefore set aside. The refund dispute was remitted for fresh examination on the grounds actually set out in the notice, and the credit denial was set aside in favour of the assessee.

---

---

Issues: Whether denial of credit of Rs. 9,03,190/- could be sustained when the show-cause notice did not propose disallowance on the ground ultimately relied upon.

Analysis: The notice proposed rejection of the refund claim on specified grounds relating to compliance with Notification No. 11/2002-C.E. (N.T.) and the effect of drawback or rebate availed under the relevant rules. It did not propose denial of the credit amount on the ground that the input documents were erroneous. An adjudication on a ground not set out in the notice could not be sustained. The remaining refund dispute was directed to be examined afresh on the twin issues already noticed.

Conclusion: The denial of credit of Rs. 9,03,190/- on the ground of erroneous input documents was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded to the extent of setting aside the credit denial, while the refund claim was remitted for fresh consideration on the specified grounds.

Ratio Decidendi: An adverse demand or denial cannot be sustained on a ground not proposed in the show-cause notice, and the adjudication must remain confined to the notice.

---